The Japanese government’s Abenomics policy has been aimed at boosting inflation to a level where it can be seen as a positive for the country’s currency, the Japanese dollar. In Japan, as in many other countries, economic activity is determined by the country’s real gross domestic product (GDP). The higher the GDP of a country, the more stable it is. However, the policy has had its critics, some of whom feel that the move has had little effect on inflation.
Some observers believe that the price level is still too high, and that an interest rate cut is unlikely in the near future. Others think that the Bank of Japan will soon loosen monetary policy, but this will have little effect on the level of inflation because banks will still be able to lend money at higher interest rates to their customers. Others argue that Abenomics has not done anything to improve economic activity and that the central bank’s efforts have been geared towards encouraging growth in consumer spending.
This leaves a question – why has Abenomics failed to lift the price level? According to the Bank of Japan, Abenomics has helped reduce the gap between supply and demand in the economy. While there are many economists who agree that this is true, the critics say that Abenomics has actually not reduced the gap between supply and demand, but rather, caused an increase in the number of supply-demand imbalances in the economy.
For example, Abenomics has allowed banks to boost their commercial loan portfolios by buying up stock in assets that have already fallen out of use or have lost their economic value. The central bank has also provided generous loans to state and local governments, helping to make it easier for these entities to finance their current projects.
However, government agencies and private companies have not been helped by this policy because they have not received the stimulus that the banks received when they were willing to lend money at lower interest rates. As a result, they are struggling to service their existing debts and have had to borrow money from their existing lenders to cover their expenses. Banks have also continued to increase the amount of money they lend to consumers, even when prices have continued to rise.
One of the factors behind the failure of Abenomics to increase inflation is the fact that the Bank of Japan was only able to lower the price level temporarily by cutting rates, which has also led to an increase in the quantity of money spent on imports. goods and services, thereby reducing supply in the economy.
